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According to the new bill, DASPs must file a report with the Texas Department of Banking within 90 days of the end of each fiscal year.
The Texas House of Representatives passed a new bill requiring crypto exchanges to provide proof of reserves. Designated as HB1666, the bill could require companies to maintain sufficient reserves to cover all user funds at all times. Thus, the bill aims to increase transparency between digital asset service providers (DASPs) and their users.
HB1666 comes in response to recent incidents of mismanagement of consumer funds by some DASPs. These events have resulted in the loss of billions of dollars in investments. The sponsor noted no direct statutes currently protect Texans from exploitation by DASPs. Further, the bill states there are at least 8.5 million Texans with digital asset investments.
Consequently, this new bill will apply to all DASPs with more than 500 customers in the state or at least ten million dollars in customer funds. Also, the bill will secure consumer funds by providing strict requirements for the DASPs to follow in storing, using, and reporting user funds. The bill will take effect in September 2021.
Texas New Crypto Bill: A Step in the Right Direction
According to the new bill, DASPs must file a report with the Texas Department of Banking within 90 days of the end of each fiscal year. The report must include an attestation of outstanding liability to customers and evidence of customer assets held by the provider. It must also include an auditor’s attestation about the authenticity and accuracy of the report.
Again, DASPs must include a plan to allow auditors and customers to review the digital assets quarterly, and the customer’s digital assets any time.
The bill’s passage has been welcomed by many in the crypto industry as a positive step towards increased transparency and accountability. This is because it focuses on transparency rather than heavy regulation or outright ban.
Meanwhile, another bill limiting incentives for crypto miners is in the works. The bill was unanimously approved by the Senate and is now headed to the Texas House of reps for approval. Whatever the case, the Texas bills may become a template for other states pursuing regulation of the industry.